In China, Coach's revenues continued to increase at double-digit
percentages and are expected to be about $185 million in fiscal
year 2011, up significantly from around $100 million in fiscal year
2010. ((
Coach's CEO Discusses Q3 2011 Results - Earnings
Call Transcript
, seekingalpha.com)) However, factors like rising inflation and
slowing GDP growth in China could hinder Coach's rapid growth in
China.

In the past, rapid economic growth and rising wages have
directly translated to increases in luxury retail sales in China.
As a result, the country that for so long has been infamous for its
thriftiness has become the world's largest market for luxury
goods. As of December 2010, sales of luxury goods in China
rose to $10.7 billion, or 30% of total global sales, up from $9.4
billion in 2009, according to the World Luxury Association
(WLA).

However, inflation in China hit a 32-month high of 5.4% in March
and will likely continue its rise in the months ahead. On top of
that, China's economy, accustomed to double-digit growth, is only
expected to grow 8-9% this year.

As inflation becomes uncomfortably high this may negatively
impact consumer spending, especially on discretionary luxury
items.

We currently forecast strong growth in daily revenue per store
from Coach's handbag sales, driven largely by increasing demand in
China. However, if sales in China see a slowdown due to rising
inflation, our projections could prove optimistic.

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